Definition ∞ Ethereum Supply Scarcity describes a condition where the circulating supply of ETH becomes limited relative to demand. This situation can arise from various factors, including significant amounts of ETH being locked in staking contracts or burned through transaction fees. A reduced available supply can exert upward pressure on the asset’s price. It highlights the deflationary mechanisms within the Ethereum network.
Context ∞ The implementation of EIP-1559 and the transition to Proof-of-Stake (the Merge) have fundamentally altered Ethereum’s supply dynamics, making supply scarcity a prominent topic. Ongoing discussions center on the rate of ETH burning and the amount of ETH staked, both contributing to its diminishing availability. Monitoring these factors is crucial for understanding Ethereum’s long-term value proposition.
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